Pacific Legal Foundation Applauds California’s Move to End Home Equity Theft Loophole

On Wednesday, October 1, California Governor Gavin Newsom signed Assembly Bill 418 by Assemblywoman Lori D. Wilson (D-Suisun City), closing a loophole that allowed California localities to seize and transfer homes to the government or nonprofits without compensating former owners for their hard-earned equity.

“For too long, California allowed local governments to strip homeowners of their life savings,” said Jim Manley, director of state policy at Pacific Legal Foundation (PLF). “With the signing of AB 418, that injustice ends.”

AB 418 marks one more victory in PLF’s decade-long fight to end home equity theft in all 50 states. For decades, state laws failed to protect property owners against the worst kind of government overreach: stealing from people who are already struggling. Local governments, including in California, seized entire homes from people who fell behind on property tax debts—without refunding any surplus equity to the former owners.

In 2023 PLF won a unanimous Supreme Court victory in Tyler v. Hennepin County (brought on behalf of 94-year-old Minneapolis woman Geraldine Tyler), which established that when government seizes property for unpaid taxes it cannot pocket more than what is owed. In the two years since that victory, PLF’s state policy team has worked with state legislators around the country to fix laws and loopholes that still allow home equity theft—including in California.

Manley called AB 418 “a victory not just for California property owners, but for property rights everywhere.” One more loophole allowing home equity theft is now closed—bringing PLF closer to its goal of ending the unconstitutional practice in every state.  As Chief Justice John Roberts wrote in the Tyler decision, “The taxpayer must render unto Caesar what is Caesar’s, but no more.”

Home equity theft is also coming back to the Supreme Court: Friday the justices granted the case of Pung v. Isabella County, Michigan.